Imperfect deal is better than no deal

PublishedTuesday, February 23, 2010

The United States Administration is often derided by its citizens as a hopelessly bureaucratic and inefficient organisation that is barely fit for purpose. Certainly, anybody who has had dealings with the federal government apparatus would symphonise with the idea that it is an out-of-touch organisation that can send people mad with frustration – witness the man who flew a plane into an Inland Revenue Service building in Texas last week, killing himself and one other.

This annoyance and frustration with the federal government has spawned a new political movement in the US, the tea-party brigade. These campaigners, who basically don't want to pay taxes, are beginning to wield serious influence in the US and threaten to gum up the wheels of government even further by encouraging Republicans to vote "no" to everything – even the necessities.

Despite the frustrations, however, the US Administration does seem to be rather good at striking deals with other governments. Indeed, the one-sided nature of many of these agreements makes me wonder whether US officials go into meetings and hypnotise the representatives of other countries into making duff deals.

Take, for example, the 2003 extradition treaty between the UK and the US, which is one of the most craven pieces of legislation ever passed in Britain. Under the terms of this lopsided deal, the UK will send anybody accused of a crime to face charges in the US. But if we Brits want to charge an American, we have to show probable cause before they are stuck on a plane. On this tilted playing field, the British must have a case before requesting extradition while the US needs only a suspicion.

Another troublesome trend has been the extension of America's own laws to cover citizens of other countries. I met a businessman a few years ago who was facing extradition to the US because he had sold a micro-light aircraft to an individual in Iran. This was deemed to have breached the US's sanctions regime against Iran and because the plane had parts that were made in America, the US Government was able to apply its laws to this businessman – even though he had never actually visited the US.

Then there is the Open Skies agreement that Europe struck with the US in 2007 – another ludicrously one-sided affair. Going into the negotiations, the US wanted Europe to open its airports to free competition while Europe wanted restrictions on foreign ownership of US airlines relaxed as well as the ability to fly on from one American city to another. Guess which party left disappointed.

Not that pushing through the Open Skies agreement was the wrong thing to do. Quite the reverse. Aviation has for too long been governed by bilateral treaties between countries. These treaties dictate exactly how many flights can be made by which airlines to which cities so that, for example, Canada can restrict Emirates airline to flying to only Toronto – and then only three times a week. Very silly.

The Open Skies agreement meant that any European or US airline would be able to fly from any European airport to any American airport. This was primarily aimed at breaking the stranglehold at Heathrow, the world's busiest international airport, where only four airlines had previously been allowed to fly to the US.

Europe agreed to introduce Open Skies in 2007 only if the two sides could reconvene in 2010 to break the deadlock on foreign ownership of US carriers and cabotage (which would allow a European airline to fly into New York and then go on to Los Angeles). The talks began in Madrid last week but broke down as the Americans once again refused to budge on either the ownership or cabotage issue. There will be further meetings later this year but nobody expects much to change, which raises the possibility of Europe reversing the whole Open Skies process – as it is permitted to do.

Let us hope not because it has taken more than two decades to get this far. The US knows it has the upper hand and can, therefore, afford to be stubborn about the issues Europe is pressing for. Hopefully that stubbornness will not put off other countries pushing for similar Open Skies deals because restrictive bilateral aviation treaties need to be consigned to history.

The US's ability to strike these one-sided deals can be frustrating for the rest of the world but sometimes it is better to get an imperfect deal than no deal at all.

- The writer is business correspondent of the Times of London. The views expressed are his own

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